Audit Finds Wisconsin’s Medicaid System Overextended, Ripe for Fraud

An audit of the state Department of Health Services, which administers Wisconsin’s medical assistance programs under the umbrella of Medicaid, has raised red flags pointing to potential fraud, waste, and inefficiencies which may have cost taxpayers millions.

The evaluation by the Legislative Audit Bureau (LAB), a nonpartisan service agency charged with evaluating and auditing state agencies, notes DHS’ increasing reliance on private contractors in cash-strapped times and an accounting system that leaves billions of dollars unaccounted for that were spent on health-care programs.

“The State’s budgeting and financial management practices have not kept pace with growth in the size and complexity of the Medical Assistance program,” states the report, conducted for the Joint Legislative Audit Committee.

The bureau found DHS “neither includes all Medical Assistance costs in its budget nor records them as the program’s expenditures.

“In addition, DHS neither budgets nor routinely accounts for Medical Assistance expenditures on a subprogram basis. This type of information is crucial because subprograms, such as BadgerCare Plus, are often the focus of proposed programmatic changes,” the document notes.

Explosion in Growth Without Resources

Wisconsin’s Medical Assistance Program, funded through federal and state tax dollars, experienced massive growth during the past five fiscal years, expanding from 870,201 recipients in January 2007 to 1.2 million in January 2011. The costs have increased commensurately, from $5 billion in fiscal 2007 to $7.5 billion in 2011.

The influx in use and expenditures was driven mostly by the 2007 expansion of program eligibility through BadgerCare Plus, the state health insurance program for children from low-income families and their caregivers. A crippling recession and a stagnant recovery have pushed down incomes, driving up recipient counts.

About 87 percent of the increase in expenditures was funded by federal taxpayers. State taxpayer funding for the program increased from $2.1 billion to $2.4 billion during the same period. Spending on BadgerCare Plus increased 75.4 percent, from $916.1 million in fiscal 2007 to $1.6 billion in fiscal 2010, according to state Rep. Samantha Kerkman, R- Powers Lake, co-chairwoman of the Audit Committee.

“We have seen the expansion of programs before we have had the ability to fund the program,” said Kerkman, who added that she has been calling for the audit for more than a year and a half. “Gov. [Jim] Doyle expanded the program without having the resources.”

Vendor Oversight Deemed Lacking

As Health Services faced budget cuts and staff reduction, it increasingly has turned to vendors to help administer medical assistance. The audit found that from fiscal 2007 through fiscal 2011, DHS paid $411.9 million to vendors for administrative support while vendor oversight has proved less than stellar.

“For example, DHS has not consistently ensured that adequate funding was available before authorizing additional contract work or that services were obtained at a competitive price,” the audit states.

Paul Stuiber, the Legislative Audit Bureau’s deputy state auditor for program evaluation, said providers embarked on a hiring blitz at a time when the state department experienced hiring freezes and furloughs.

Fraud investigations during the five-year period declined by nearly 750 cases, to 1,424 in fiscal 2011, largely due to deep cuts in state funding for fraud probes. Allocations dropped 86 percent, from a high of $602,500 to $85,500 in the past fiscal year.

“It has significantly hampered the ability of local governments to sustain the fraud prevention efforts they had in the past,” Stuiber said.

Illegal Immigrants Accessing Services

Kerkman said the report reaffirmed some of the things she has heard locally about the administration of medical assistance and potential recipient fraud. The lawmaker, who represents the 66th Assembly District in far southeast Wisconsin, said she can see the Illinois tree line from her Powers Lake home. And she said she has heard plenty of stories alleging Illinois residents coming to Wisconsin and fraudulently receiving benefits.

The audit found 1,225 illegal immigrants had at least one medical assistance claim during the five-year period—amounting to a cost to the state of $10.7 million, $9 million of that for pregnancy-related services. Illegal immigrants and lawfully admitted adults who have resided in the United States for less than five years are eligible for specific types of emergency or pregnancy-related procedures.

Battling Waste and Fraud

The Legislative Audit Bureau recommends several fixes, and that DHS report to the audit committee by July 2 concerning their implementation. DHS Deputy Secretary Kitty Rhoades in a statement said taxpayers, health-care providers, and Medicaid recipients should expect “zero tolerance for inefficiency, waste, and fraud.”

“Over the last 12 months, we recognized many areas that needed improvement and began looking at ways to change how we operate the program,” Rhoades said.

The fraud fight is being led by the newly created Office of Inspector General, inside the DHS and directed by Inspector General Allan White. Its purpose is to centralize the effort to combat fraud, and it is looking to fill 19 positions as of July 1.

White said the staff additions will help the office answer some of the concerns raised in the audit.

“We need a balance. We don’t want to be a burden on providers and recipients,” he said. “We want to make sure eligible people get the services they deserve, and the [Walker] administration has instructed us look for whatever resources we need going forward.”